AGREEMENT AND PLAN OF MERGER

Exhibit 2.8

 

 

 

AGREEMENT AND PLAN OF MERGER

by and among

SUNRISE SENIOR LIVING, INC.

SSLI-06 MERGER SUB, INC.,

TRINITY HOSPICE, INC.,

KRG CAPITAL FUND II, L.P.,
KRG CAPITAL FUND II (FF), L.P.,
KRG CAPITAL FUND II (PA), L.P.,
KRG CO-INVESTMENT, L.L.C., and
AMERICAN CAPITAL STRATEGIES, LTD.,

as the Principal Stockholders,

and

KRG CAPITAL MANAGEMENT, L.P.,

as the Principal Stockholders’ Representative

dated as of

August 2, 2006

 

 

TABLE OF CONTENTS

						Page
ARTICLE 1 DEFINITIONS AND INTERPRETATION							2
ARTICLE 2 THE MERGER							2
		2.01.		The Merger			2
		2.02.		Closing; Effective Time			2
		2.03.		Effects of the Merger			3
		2.04.		Charter; Bylaws			3
		2.05.		Directors and Officers of the Surviving Corporation			3
ARTICLE 3 CONVERSION OF SECURITIES; CONTINGENT PAYMENTS; WORKING CAPITAL ADJUSTMENT							4
		3.01.		Merger Consideration			4
		3.02.		Appraisal Rights			7
		3.03.		Stock Options			8
		3.04.		Capital Stock of Merger Sub			9
		3.05.		Surrender and Exchange of Certificates			9
		3.06.		Further Ownership Rights in Company Capital Stock			10
		3.07.		Lost, Stolen or Destroyed Certificates			11
		3.08.		Working Capital Adjustment			11
		3.09.		Medicare Cap Liability Escrow Amount Determination			13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS							13
		4.01.		Organization and Good Standing			14
		4.02.		Authorization			14
		4.03.		Governmental Authorization			15
		4.04.		Non-contravention			15
		4.05.		Acquired Companies			16
		4.06.		Capitalization			17
		4.07.		Financial Statements			18
		4.08.		Absence of Certain Changes			19
		4.09.		No Undisclosed Liabilities			20
		4.10.		Litigation			20
		4.11.		Taxes			21
		4.12.		ERISA			22
		4.13.		Labor Matters			25
		4.14.		Compliance with Laws			25
		4.15.		Licenses and Permits			26
		4.16.		Contracts			26
		4.17.		Intellectual Property			28
		4.18.		Environmental Matters			30
		4.19.		Agreements with Affiliates			31
		4.20.		Insurance			31

						Page
		4.21.		Real Property			32
		4.22.		Title to Property			33
		4.23.		Condition of Assets			33
		4.24.		Customers and Suppliers			33
		4.25.		Books and Records			33
		4.26.		Finders’ Fees			34
		4.27.		Relations with Governments			34
		4.28.		Health Regulatory Compliance			34
		4.29.		Required Vote			37
		4.30.		Accounts Receivable			38
		4.31.		Existing Loans			38
		4.32.		Investment Company Act; Investment Advisers Act			39
		4.33.		Takeover Statutes			39
		4.34.		Disclosure			39
		4.35.		Title to the Principal Stockholders’ Shares			40
		4.36.		Merger Consideration and Other Payment Calculation Statement			40
		4.37.		No Other Representations or Warranties			40
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SUNRISE AND MERGER SUB							41
		5.01.		Corporate Existence and Power			41
		5.02.		Corporate Authorization			41
		5.03.		Governmental Authorization			42
		5.04.		Non-contravention			42
		5.05.		No Brokers or Finders			42
		5.06.		No Other Representations or Warranties			42
ARTICLE 6 COVENANTS RELATING TO CONDUCT OF BUSINESS							43
		6.01.		Conduct by the KRG Stockholders and the Acquired Companies			43
		6.02.		Delivery of Periodic Financial Information			45
		6.03.		Patient Care			45
		6.04.		Dividends and Distributions			46
		6.05.		Insurance Matters			46
		6.06.		280G Consent			46
ARTICLE 7 ADDITIONAL AGREEMENTS							46
		7.01.		Government and Other Consents and Approvals			46
		7.02.		Access to Information			47
		7.03.		Notices of Certain Events			47
		7.04.		Affiliate Transactions			48
		7.05.		Commercially Reasonable Efforts			48
		7.06.		Public Announcements			49
		7.07.		Further Assurances			50
		7.08.		Confidentiality			50
		7.09.		Employee Benefits			50
		7.10.		Tax Matters			51
		7.11.		Release and Nonsolicitation			52

						Page
		7.12.		Repayment of Existing Loans			52
		7.13.		No Solicitation			52
		7.14.		Termination of Certain Agreements			54
		7.15.		Takeover Statutes			54
		7.16.		Stockholder and Other Claims			54
		7.17.		Stockholder Arrangements			55
		7.18.		Post-Closing Cooperation			55
		7.19.		No Redemption of Company Capital Stock			55
		7.20.		Transfer of Securities			55
		7.21.		Unpaid Tax Refunds			56
ARTICLE 8 CONDITIONS TO THE CLOSING							56
		8.01.		Conditions to Each Party’s Obligations to Effect the Merger			56
		8.02.		Conditions to the Obligations of Sunrise and Merger Sub			56
		8.03.		Conditions to the Obligations of the Principal Stockholders			59
ARTICLE 9 ADDITIONAL CLOSING DELIVERIES							59
		9.01.		Deliveries by the Principal Stockholders and the Company			59
		9.02.		Deliveries by Sunrise and Merger Sub			61
ARTICLE 10 INDEMNIFICATION							61
		10.01.		General Indemnification			61
		10.02.		Survival			65
		10.03.		Limitation on Liability			65
		10.04.		Payment			67
		10.05.		No Recourse			68
		10.06.		Effect of Knowledge on Indemnification			68
		10.07.		Remedies Exclusive			68
		10.08.		No Duplication of Claims			69
		10.09.		Characterization of Payments			69
ARTICLE 11 TERMINATION							69
		11.01.		Termination			69
		11.02.		Effect of Termination			71
ARTICLE 12 MISCELLANEOUS							71
		12.01.		Notices			71
		12.02.		Amendments; No Waivers			73
		12.03.		Expenses			74
		12.04.		Successors and Assigns; Benefit			74
		12.05.		Governing Law			74
		12.06.		Resolution of Disputes			75
		12.07.		Severability			75
		12.08.		Table of Contents; Headings			75
		12.09.		Counterparts; Effectiveness			76
		12.10.		WAIVER OF JURY TRIAL			76
		12.11.		Entire Agreement			76

						Page
		12.12.		Specific Performance			76
		12.13.		Principal Stockholders’ Representative			76
		12.14.		No Third Party Beneficiary			78

EXHIBITS

Exhibit A		Certificate of Incorporation of Surviving Corporation
Exhibit B		Form of Escrow Agreement
Exhibit C		Form of Release Agreement
Exhibit D		Form of Nonsolicitation Agreement
Exhibit E-1		Form of Opinion of Counsel of the KRG Stockholders
Exhibit E-2		Form of Opinion of Counsel of the ACS Stockholder
Exhibit E-3		Form of Opinion of Counsel of the Company

AGREEMENT AND PLAN OF MERGER

      THIS AGREEMENT AND PLAN OF MERGER , dated as of August 2, 2006 (this “ Agreement ”), is entered into by and among (a) SUNRISE SENIOR LIVING, INC., a Delaware corporation (“ Sunrise ”), (b) SSLI-06 MERGER SUB, INC., a Delaware corporation and indirect wholly owned subsidiary of Sunrise (“ Merger Sub ”), (c) TRINITY HOSPICE, INC., a Delaware corporation (the “ Company ”), (d) KRG CAPITAL FUND II, L.P., a Delaware limited partnership (“ KRG II ”), KRG CAPITAL FUND II (FF), L.P., a Delaware limited partnership (“ KRG II (FF) ”), KRG CAPITAL FUND II (PA), L.P., a Delaware limited partnership (“ KRG II (PA) ”) and KRG CO-INVESTMENT, L.L.C., a Delaware limited liability company (“ KRG Co-Investment ” and together with KRG II, KRG II (FF) and KRG II (PA), each individually referred to herein as a “ KRG Stockholder ”, and collectively as the “ KRG Stockholders ”), (e) AMERICAN CAPITAL STRATEGIES, LTD., a Delaware corporation (the “ ACS Stockholder ”) and (f) KRG CAPITAL MANAGEMENT, L.P., a Delaware limited partnership, as the Principal Stockholders’ Representative (the “ Principal Stockholders’ Representative ”). The KRG Stockholders and the ACS Stockholder may be referred to herein individually as a “ Principal Stockholder ”, and collectively, as the “ Principal Stockholders ”.

WITNESSETH:

           WHEREAS , upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “ DGCL ”), Sunrise will acquire the Company through a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “ Merger ”), which Merger will result in, among other things, the Company becoming a wholly-owned subsidiary of Sunrise;

           WHEREAS , the board of directors of Sunrise has (i) determined that it is in the best interests of Sunrise and its stockholders for Sunrise to acquire the Company upon the terms and conditions set forth herein; (ii) adopted and approved this Agreement; and (iii) approved the Merger and the other Contemplated Transactions;

           WHEREAS , the board of directors of Merger Sub has adopted and approved this Agreement and has approved the Merger and the other Contemplated Transactions in accordance with the DGCL and upon the terms and conditions set forth herein;

           WHEREAS , the board of directors of the Company has unanimously (i) determined that the Merger and the other Contemplated Transactions are consistent with the long-term strategy of the Company and in the best interests of the stockholders and other security holders of the Company; (ii) adopted and approved this Agreement; (iii) approved the Merger and the other Contemplated Transactions; (iv) directed that this Agreement, the Merger and the other Contemplated Transactions be submitted to the Company’s stockholders entitled to vote on such matters for consideration and approval at a meeting or by written consent in accordance with the DGCL; (v) declared the advisability of the adoption of the Agreement and consummation of the Merger and the other Contemplated Transactions and (vi) recommended the approval of the Agreement, the Merger and the other Contemplated Transactions by the stockholders of the Company entitled to vote on such matters in accordance with the DGCL; and

           WHEREAS , promptly following the execution and delivery of this Agreement, holders of at least a majority of the shares of Class A Common Stock of the Company, the only class of stock of the Company entitled to vote on this Agreement, the Merger and the Contemplated Transactions, are expected to approve this Agreement, the Merger and the other Contemplated Transactions by written consent in accordance with Section 228 of the DGCL.

           NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS AND INTERPRETATION

     Capitalized terms used herein without definition have the respective meanings assigned thereto in Annex I attached hereto and incorporated herein for all purposes of this Agreement (such definitions to be equally applicable to both the singular and plural forms of the terms defined). When a reference is made in this Agreement to Sections, subsections, Schedules or Exhibits, such reference is to a Section, subsection, Schedule or Exhibit to this Agreement unless otherwise indicated. The words “include”, “includes” and “including” when used herein are deemed in each case to be followed by the words “without limitation”. The word “herein” and similar references mean, except where a specific Section or Article reference is expressly indicated, the entire Agreement rather than any specific Section or Article. The phrase “made available” when referring to documents or other information “made available” to Sunrise by the Acquired Companies or any Principal Stockholder, shall mean that such documents or other information provided to Sunrise or its counsel, including the documents and information located in the Company’s virtual data room prior to the date of this Agreement and to which virtual data room Sunrise has been granted access.

ARTICLE 2
THE MERGER

      2.01. The Merger.

          Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”).

      2.02. Closing; Effective Time.

          Subject to the provisions of Article 8 , the closing of the Merger (the “ Closing ”) shall take place at the McLean, Virginia offices of Hogan & Hartson L.L.P., on September 8, 2006; provided that if all of the conditions set forth in Article 8 are not satisfied (or waived in accordance with this Agreement) on or before September 8, 2006, then, subject to Article 11 , the Closing will be held two (2) Business Days after the satisfaction (or waiver in accordance with this Agreement) of such conditions (the date on which the Closing will occur pursuant to this

Section 2.02 is referred to herein as the “ Closing Date ”). As soon as practicable following the Closing, on the Closing Date, Sunrise and the Company shall cause a certificate of merger to be filed with the Secretary of State of the State of Delaware to effectuate the Merger, in such form as required by, and executed and delivered in accordance with, the relevant provisions of the DGCL (the “ Certificate of Merger ”) (the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or such later time as is specified in the Certificate of Merger and as is agreed to in writing by Sunrise and the Company, being the “ Effective Time ”) and shall make all other filings or recordings required under the DGCL in connection with the Merger.

      2.03. Effects of the Merger.

          The Merger shall have the effects set forth in Section 259 of the DGCL.

      2.04. Charter; Bylaws.

          (a) The certificate of incorporation of the Surviving Corporation shall be amended at the Effective Time to read in the form of Exhibit A , and, as so amended, such certificate of incorporation shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

          (b) The Company and Merger Sub shall take all necessary actions to cause the by-laws of Merger Sub as in effect immediately prior to the Effective Time to become the by-laws of the Surviving Corporation immediately after the Effective Time until thereafter changed or amended as provided therein or by applicable Law; provided, however, that the name of the Company reflected in the by-laws of the Surviving Corporation shall be changed to Trinity Hospice, Inc.

      2.05. Directors and Officers of the Surviving Corporation.

          The directors of the Company and persons holding comparable positions with the other Acquired Companies immediately prior to the Effective Time shall submit their resignations to be effective as of the Effective Time. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office until the earlier of his or her resignation or removal or death or until his or her successor is duly elected and qualified, as the case may be, in accordance with the certificate of incorporation and the bylaws of the Surviving Corporation and applicable Law. The officers of the Company (other than those who Sunrise determines shall not remain as officers of the Surviving Corporation) immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office with the Surviving Corporation, in each case until the earlier of his or her resignation or removal or death or until his or her successor is duly elected and qualified, as the case may be, in accordance with the certificate of incorporation and bylaws of the Surviving Corporation and applicable Law.

ARTICLE 3
CONVERSION OF SECURITIES;
CONTINGENT PAYMENTS; WORKING CAPITAL ADJUSTMENT

      3.01. Merger Consideration.

          (a) Merger Consideration. The aggregate cash amount to be paid at Closing by Sunrise to the Stockholders in exchange for and upon conversion of their shares of Company Capital Stock (the “ Merger Consideration ”) shall be an amount equal to (i) $68,025,000, minus (ii) the Medicare Cap Liability Escrow Amount, minus (iii) the Indemnity Escrow Amount, plus (iv) if the Estimated Working Capital is greater than zero, the difference between the Estimated Working Capital and zero, minus (v) if the Estimated Working Capital is less than zero, the difference between zero and the Estimated Working Capital, minus (vi) the amount necessary to cause all Debt under Existing Loans (that has not been satisfied in full) to be satisfied in full at the Closing, including the principal balance and all accrued and unpaid interest thereon and other fees and costs related thereto, minus (vii) the aggregate amount of all Transaction Expenses (to the extent not paid prior to the Closing Date), minus (viii) the aggregate of all Employee Related Payments, minus (ix) the aggregate of all KRG Payments, minus (x) the Other Tail Insurance Premiums; provided however, that there shall be no duplication in any of the reductions (including if the Medicare Cap Liability constitutes a Debt) to the extent such liability or obligation is reserved in both the Estimated Working Capital and Final Working Capital.

          (b) Escrow Amount . On the Closing Date and in connection with paying the Merger Consideration to the Stockholders in exchange for their shares of Company Capital Stock pursuant to this Section 3.01 , Sunrise shall deposit in escrow an amount equal to the sum of (x) the Medicare Cap Liability Escrow Amount plus (y) the Indemnity Escrow Amount (the “ Escrow Amount ”) with United Bank (the “ Escrow Agent ”) to be held and disbursed as contemplated in Article 10 and pursuant to the terms and conditions of an Escrow Agreement to be entered into among the parties at Closing in the form attached hereto as Exhibit B (the “ Escrow Agreement ”). Any amounts that are not to be disbursed to the Sunrise Indemnified Parties pursuant to the terms of the Escrow Agreement and Article 10 hereunder shall be distributed to the Principal Stockholders’ Representative pursuant to the terms and conditions of the Escrow Agreement and Article 10 in exchange for the representations, warranties, covenants and agreements of the Principal Stockholders contained in this Agreement, including the indemnification obligations under Article 10 .

          The Escrow Amount shall be held in escrow and, as provided in Article 10 , shall be available to pay the Sunrise Indemnified Parties and shall be distributed pursuant to the terms and conditions of the Escrow Agreement and the terms and conditions of this Section 3.01(b) and Article 10 to the Principal Stockholders’ Representative. The Escrow Amount shall be reduced from time to time in accordance with Article 10 , and shall be increased from time to time by the amount of any interest, dividends, earnings and other income on such amount.

          (c) Payment of Merger Consideration . On the Closing Date, Sunrise shall:

               (i) Pay to the Paying Agent, for payment to the holders of the Class B-1 Preferred Stock, the Class B-1 Preferred Stock Liquidation Amount.

               (ii) Pay to the Paying Agent, for payment to the holders of the Class I Preferred Stock, the Class I Preferred Stock Liquidation Amount.

               (iii) Pay to the Paying Agent, for payment to the holders of the Class II Preferred Stock, the Class II Preferred Stock Liquidation Amount.

               (iv) Pay to the Paying Agent, for payment to the holders of the Class A-1-A1 Preferred Stock, the Class A-1-A1 Preferred Stock Liquidation Amount.

               (v) Pay to the Paying Agent, for payment to the holders of the Class A-1-A2 Preferred Stock, the Class A-1-A2 Preferred Stock Liquidation Amount.

               (vi) Pay to the Paying Agent, for payment to the holders of the Class A-1-B1 Preferred Stock and Class A-1-B2 Preferred Stock on a pari passu basis, the lesser of (x) the Class A-1-B1 Preferred Stock Liquidation Amount and the Class A-1-B2 Preferred Stock Liquidation Amount or (y) if the remaining Merger Consideration (net of the payments in (i)-(v) above) is insufficient to permit payment of the aggregate of the Class A-1-B1 Preferred Stock Liquidation Amount and the Class A-1-B2 Preferred Stock Liquidation Amount, such remaining Merger Consideration.

               (vii) Pay to the Paying Agent, for payment to the holders of Company Common Stock the remaining Merger Consideration (net of the payments in (i) — (vi) above), if any.

          (d) Effect on Stock. Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Sunrise, Merger Sub, the Company or the Stockholders:

               (i) Subject to the provisions of this Article 3 and other applicable provisions of this Agreement, each share of Class B-1 Preferred Stock issued and outstanding immediately prior to the Effective Time (other than Appraisal Shares) shall cease to be outstanding and automatically shall be converted into the right to receive an amount of cash equal to the Class B-1 Preferred Stock Liquidation Amount allocable to each such share of Class B-1 Preferred Stock pursuant to the Company’s Charter, as amended by the Charter Amendment.

               (ii) Subject to the provisions of this Article 3 and other applicable provisions of this Agreement, each share of Class I Preferred Stock issued and outstanding immediately prior to the Effective Time (other than Appraisal Shares) shall cease to be outstanding and automatically shall be converted into the right to receive an amount of cash equal to the Class I Preferred Stock Liquidation Amount allocable to each such share of Class I Preferred Stock pursuant to the Company’s Charter, as amended by the Charter Amendment.

               (iii) Subject to the provisions of this Article 3 and other applicable provisions of this Agreement, each share of Class II Preferred Stock issued and outstanding immediately prior to the Effective Time (other than Appraisal Shares) shall cease to be outstanding and automatically shall be converted into the right to receive an amount of cash equal to the Class II Preferred Stock Liquidation Amount allocable to each such share of Class II Preferred Stock pursuant to the Company’s Charter, as amended by the Charter Amendment.

               (iv) Subject to the provisions of this Article 3 and other applicable provisions of this Agreement, each share of Class A-1-A1 Preferred Stock issued and outstanding immediately prior to the Effective Time (other than Appraisal Shares) shall cease to be outstanding and automatically shall be converted into the right to receive an amount of cash equal to the Class A-1-A1 Preferred Stock Liquidation Amount allocable to each such share of Class A-1-A1 Preferred Stock pursuant to the Company’s Charter, as amended by the Charter Amendment.

               (v) Subject to the provisions of this Article 3 and other applicable provisions of this Agreement, each share of Class A-1-A2 Preferred Stock issued and outstanding immediately prior to the Effective Time (other than Appraisal Shares) shall cease to be outstanding and automatically shall be converted into the right to receive an amount of cash equal to the Class A-1-A2 Preferred Stock Liquidation Amount allocable to each such share of Class A-1-A2 Preferred Stock pursuant to the Company’s Charter, as amended by the Charter Amendment.

               (vi) Subject to the provisions of this Article 3 and other applicable provisions of this Agreement, each share of Class A-1-B1 Preferred Stock and Class A-1-B2 Preferred Stock issued and outstanding immediately prior to the Effective Time (other than Appraisal Shares) shall cease to be outstanding and automatically shall be converted into (x) the right to receive an amount of cash equal to the lesser of (A) the Class A-1-B1 Preferred Stock Liquidation Amount or Class A-1-B2 Preferred Stock Liquidation Amount, as applicable, allocable to each such share of Class A-1-B1 Preferred Stock or Class A-1-B2 Preferred Stock, as applicable, on a pro rata and pari passu basis pursuant to the Company’s Charter, as amended by the Charter Amendment and (B) if the remaining Merger Consideration (net of the payments in (i) — (v) above) is insufficient to permit payment of the aggregate of the Class A-1-B1 Preferred Stock Liquidation Amount and the Class A-1-B2 Preferred Stock Liquidation Amount, such remaining Merger Consideration, allocable to each share of Class A-1-B1 Preferred Stock or Class A-1-B2 Preferred Stock, as applicable, on a pro rata and pari passu basis and (y) the contingent right to receive payment, if any, in connection with the Final Working Capital Payment pursuant to and in accordance with Section 3.08(c) .

               (vii) Subject to the provisions of this Article 3 and other applicable provisions of this Agreement, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than Appraisal Shares) shall cease to be outstanding and automatically shall be converted into (x) the right to receive an amount of cash, if any, equal to the remaining Merger Consideration (net of the payments in (i)-(vi) above) allocable to each such share of Company Common Stock pursuant to the Company’s Charter, as amended by the Charter Amendment, and (y) the contingent right to receive payment, if any, in connection with the Final Working Capital Payment pursuant to and in accordance with Section 3.08(c) . If no Merger Consideration remains (after the payments in (i)-(vi) above), then each share of Common Stock shall be cancelled and shall cease to exist and no other consideration shall be delivered or deliverable upon exchange therefore other than the contingent right to receive payment, if any, in connection with the Final Working Capital Payment pursuant to and in accordance with Section 3.08(c) .

Notwithstanding anything in this Agreement to the contrary, at Closing, neither Sunrise nor Merger Sub shall be required to pay any amounts in excess of the Merger Consideration upon the conversion pursuant to the Merger of all shares of Company Capital Stock.

          (e) Other Payments at Closing . On the Closing Date, Sunrise shall:

               (i) on behalf of the Company, pay to such account or accounts as the Company specifies to Sunrise, the aggregate amount of all Debt under Existing Loans in accordance with Section 3.01(a) ;

               (ii) on behalf of the Company, pay to such account or accounts as the Company specifies to Sunrise, the aggregate amount of all Transaction Expenses (to the extent not paid prior to Closing) in accordance with Section 3.01(a) ;

               (iii) on behalf of the Company, pay to such account or accounts as the Company specifies to Sunrise, the aggregate amount of all Employee Related Payments in accordance with Section 3.01(a) ;

               (iv) on behalf of the Company, pay to such account or accounts as the Company specifies to Sunrise, the aggregate amount of all KRG Payments in accordance with Section 3.01(a) ; and

               (v) on behalf of the Company, pay to such account or accounts as the Company specifies to Sunrise, the aggregate amount of the D&O Tail Premium in accordance with Section 3.01(a) .

          (f) Pre-Closing Delivery of Information . No later than three (3) Business Days prior to the scheduled Closing Date, the Company shall deliver to Sunrise: (i) a true and correct schedule detailing the Company’s calculation of the Merger Consideration payments specified in Section 3.01(c) (i)-(vii) (including the aggregate Merger Consideration for each class of Company Capital Stock, name of each holder owning stock within a class, and the Merger Consideration payable to such holder) and (ii) a true and correct schedule detailing the Company’s calculations of the other payments specified in Section 3.01(e)(i)-(v) (the “ Merger Consideration and Other Payment Calculation Statement ”). Such schedules shall be attached to this Agreement as Schedule 3.01(f) .

      3.02. Appraisal Rights.

          Notwithstanding anything in this Agreement to the contrary, shares (“ Appraisal Shares ”) of Company Capital Stock that are outstanding immediately prior to the Effective Time and that are held by any Person (i) who has not voted in favor of the Merger or consented thereto in writing, (ii) who shall have properly demanded in writing appraisal of such Appraisal Shares pursuant to, and who complies in all respects with, Section 262 of the DGCL (“ Section 262 ”) and (iii) who has neither effectively withdrawn nor lost the right to such payment shall not be converted into the right to receive Merger Consideration as provided in Section 3.01 , but rather the holders of Appraisal Shares shall be entitled to payment of the fair value of such Appraisal Shares in accordance with Section 262; provided , however , that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 then

the right of such holder to be paid the fair value of such holder’s Appraisal Shares shall cease and such Appraisal Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, Merger Consideration as provided in Section 3.01 . The Company shall serve prompt notice to Sunrise of any written demands received by the Company for appraisal of any shares of Company Capital Stock, and Sunrise shall be notified and kept reasonably informed regarding all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Sunrise, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing. If a Person shall demand appraisal of the fair value of shares of Company Capital Stock under Section 262 after the Closing and such shares thereby become Appraisal Shares, Sunrise shall be entitled to withdraw from the Exchange Fund any portion of the Merger Consideration previously deposited therein with respect to such Appraisal Shares.

      3.03. Stock Options.

          (a) As soon as practicable following the date of this Agreement, the board of directors of the Company (or, if appropriate, any committee administering the Trinity Hospice, Inc. 2002 Stock Option Plan (the “ Stock Option Plan ”)) shall adopt such resolutions or take such other actions as are required to give notice to the optionholders under such Stock Option Plan of a proposed change of control event so that such optionholders must exercise any outstanding Company Stock Options within thirty (30) days or such Company Stock Options terminate.

          (b) Prior to the Effective Time and effective upon the expiration of the 30-day notice period described in Section 3.03(a) , the board of directors of the Company shall adopt resolutions to terminate the Stock Option Plan as of the Effective Time and terminating provisions in any other Trinity Plan providing for the issuance, transfer or grant of any capital stock of Sunrise, the Company, the Surviving Corporation or any of their respective subsidiaries or any interest in respect of any capital stock of Sunrise, the Company, the Surviving Corporation or any of their respective subsidiaries (including any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock-based performance units) as of the Effective Time, and the Company shall ensure as of the Effective Time (i) that no holder of a Company Stock Option or any participant in any Trinity Plan or other Contract shall have any right thereunder to acquire any capital stock of Sunrise, the Company, the Surviving Corporation or any of their respective subsidiaries or any interest in respect of any capital stock of Sunrise, the Company, the Surviving Corporation or any of their respective subsidiaries (including any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock-based performance units) and (ii) that no holder of a Company Stock Option shall have any right to payment from Sunrise, the Company, the Surviving Corporation or any of their respective subsidiaries in respect of such Company Stock Option. In addition to and not in limitation of the foregoing provisions of this Section 3.03 , the board of directors of the Company shall take all action necessary to cause the cancellation of the Company Stock Options at or prior to the Effective Time, including obtaining any consents, waivers or acknowledgments from holders of Company Stock Options or other Equity Interests that are necessary to give effect to the transactions contemplated by this Section 3.03 .

      3.04. Capital Stock of Merger Sub.

          Each share of common stock, par value $0.01 per share, of Merger Sub (“ Merger Sub Common Stock ”) issued and outstanding immediately prior to the Effective Time shall be automatically converted into and become one (1) validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation, and shall thereafter constitute all of the issued and outstanding capital stock of the Surviving Corporation. Each stock certificate representing any shares of Merger Sub Common Stock shall continue after the Effective Time to represent ownership of such shares of capital stock of the Surviving Corporation.

      3.05. Surrender and Exchange of Certificates.

          (a) Paying Agent . The parties acknowledge and agree that Corporate Stock Transfer, Inc., located in Denver, Colorado, is hereby designated to act as the paying agent in the Merger (the “ Paying Agent ”).

          (b) Sunrise to Provide Merger Consideration . On or before the Closing Date, Sunrise shall deposit with the Paying Agent cash equal to the amount of the Merger Consideration as specified in Section 3.01(a) (excluding the proportionate amount of the Merger Consideration attributable to Appraisal Shares) (the “ Exchange Fund ”). At any time following twelve (12) months after the Effective Time, all cash comprising the Exchange Fund deposited with the Paying Agent pursuant to this Section 3.05(b) , which remains undistributed to the holders of the Certificates representing shares of Company Capital Stock, shall be delivered to Sunrise upon demand, and thereafter such holders of unexchanged shares of Company Capital Stock shall be entitled to look only to Sunrise (subject to abandoned property, escheat or other similar Laws) only as general creditors thereof with respect to the Merger Consideration for payment upon due surrender of their Certificates.

          (c) Exchange Procedures . Prior to the Closing, the Company shall cause to be mailed or delivered to each holder of record of a certificate or certificates (the “ Certificates ”) that will represent as of the Effective Time the outstanding shares of Company Capital Stock to be exchanged pursuant to Section 3.01 , a letter of transmittal in a form reasonably acceptable to the Company and Sunrise (the “ Transmittal Letter ”), which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent at or after the Effective Time and shall contain instructions for use in effecting the surrender of the Certificates in exchange for the payment of the applicable Merger Consideration therefor as specified in Section 3.01(c) . Upon surrender of a Certificate to the Paying Agent, together with a Transmittal Letter, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor payment of the applicable Merger Consideration which such holder has the right to receive pursuant to Section 3.01 , after giving effect to any required withholdings, and the Certificate so surrendered shall forthwith be canceled. Promptly after the Closing, the Surviving Corporation shall cause to be mailed or delivered to each holder of record of a Certificate representing outstanding shares of Company Capital Stock as of the Effective Time a Transmittal Letter if reasonably requested by such holder or by the Principal Stockholders’ Representative.

          (d) Payment to Registered Holders . If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the Certificate surrendered in exchange therefor is registered, it will be a condition to such payment that (i) the Certificate so surrendered will be properly endorsed and otherwise in proper form for transfer, and (ii) the Person requesting such exchange will have paid any transfer or other Taxes required by reason of such payment in a name other than the registered holder of the Certificate surrendered or established to the satisfaction of Sunrise, or any agent designated by Sunrise, that such Tax has been paid or is not applicable.

          (e) No Liability . Notwithstanding anything to the contrary in this Agreement, none of the Paying Agent, Sunrise, Merger Sub or the Surviving Corporation (or any Affiliate thereof) shall be liable to a holder of a Certificate for any amount delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificate has not been surrendered prior to five (5) years after the Effective Time (or immediately prior to such earlier date on which the applicable Merger Consideration in respect of the shares represented by such Certificate would otherwise escheat to or become the property of any Governmental Entity), any applicable Merger Consideration or other shares, cash, dividends, distributions or other things of value in respect of the shares represented by such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interests of any Person, whether previously entitled thereto or not.

          (f) Withholding of Tax . Notwithstanding anything to the contrary in this Agreement, Sunrise or the Paying Agent will be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Stockholder such amounts as Sunrise (or any Affiliate thereof) or the Paying Agent shall determine in good faith they are required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Laws relating to Taxes. Such withheld amounts will be treated for all purposes of this Agreement as having been paid to the Stockholders in respect of which such deduction and withholding was made by Sunrise or the Paying Agent.

          (g) Paying Agent Costs and Expenses . All costs and expenses of the Paying Agent shall be borne exclusively by and shall be the sole responsibility of the Principal Stockholders.

      3.06. Further Ownership Rights in Company Capital Stock.

          The applicable Merger Consideration as specified in Section 3.01(c) and paid upon the surrender for exchange of Certificates in accordance with the terms of this Article 3 (including the contingent right to receive payment, if any, in connection with the Final Working Capital Payment pursuant to Section 3.08(c) , as contemplated in Section 3.01(d) ) shall be in full satisfaction of all rights pertaining to such Company Capital Stock (including any rights to receive accumulated but undeclared dividends on such Company Capital Stock, if any). At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of shares of Company Capital Stock outstanding immediately prior to the Effective Time on the records of the Surviving Corporation. From and after the Effective Time, the holders of Certificates representing ownership of shares of

Company Capital Stock outstanding shall cease to have any rights with respect to such shares of Company Capital Stock (including any rights to receive accumulated but undeclared dividends on such Company Common Stock, if any) except as otherwise provided for herein. If, after the Effective Time, Certificates are presented to Sunrise or the Surviving Corporation (or any Affiliate thereof) for any reason, they shall be canceled and exchanged as provided in this Article 3 .

      3.07. Lost, Stolen or Destroyed Certificates.

          In the event any Certificates representing Company Capital Stock shall have been lost, stolen or destroyed, the Paying Agent shall pay in exchange for such lost, stolen or destroyed Certificates, upon the making of an acceptable affidavit of that fact by the holder thereof and the delivery of such other documents reasonably requested by the Paying Agent, the applicable Merger Consideration; provided , however , that Sunrise may, in its sole discretion and as a condition precedent to the payment thereof, require the owner of such lost, stolen or destroyed certificates (i) to execute and deliver an indemnity agreement with respect to such Certificate in the form reasonably specified by Sunrise, and that is reasonably acceptable to the Company, prior to the Effective Time, and (ii) to post a bond in such reasonable amount and on such customary terms as Sunrise may direct as indemnity against any claim that may be made against Sunrise or the Paying Agent with respect to such Certificate.

      3.08. Working Capital Adjustment.

          (a) Not less than three (3) Business Days prior to the Closing Date, the Principal Stockholders’ Representative will deliver to Sunrise a good faith written estimate of the Working Capital as of the Closing Date (the “ Estimated Working Capital ”) setting forth in reasonable detail the Principal Stockholders’ Representative’s calculation of Estimated Working Capital and any supporting documentation relevant to such calculation, calculated consistent with GAAP and consistent with past practices, and which written estimate shall be prepared substantially in accordance with the approach used to prepare the illustration of the calculation of Working Capital as of June 30, 2006, attached to Schedule I-13 of the Disclosure Schedule, including a reasonable, good faith estimate of the portion of previously received payments under the Medicare PIP payment program that have been earned through the Closing Date and the treatment of the remaining unearned portion consistent with the treatment of such amounts on Section I-13 of the Disclosure Schedule. The Merger Consideration shall be adjusted pursuant to the definition of Merger Consideration in Section 3.01(a) downward by the amount the Estimated Working Capital is less than zero and upward by the amount the Estimated Working Capital is greater than zero, as applicable.

          (b) Promptly following the Closing Date, but in no event later than thirty (30) days after the Closing Date, Sunrise will prepare and submit to the Principal Stockholders’ Representative a statement (the “ Closing Date Statement ”) setting forth in reasonable detail, Sunrise’s calculation of the Working Capital as of the Closing Date (the “ Proposed Final Working Capital ”) and any supporting documentation relevant to such calculation, calculated and prepared in the manner contemplated in Section 3.08(a) . If Sunrise does not deliver to the Principal Stockholders’ Representative the Closing Date Statement by the thirtieth (30th) day after the Closing Date, Sunrise will be deemed to have accepted the Estimated Working Capital.

If the Principal Stockholders’ Representative disputes the correctness of the Proposed Final Working Capital, the Principal Stockholders’ Representative will notify Sunrise in writing of its objections no later than fifteen (15) days after receipt of the Closing Date Statement and will set forth, in writing and in reasonable detail, the reasons for the Principal Stockholders’ Representative’s objections. If the Principal Stockholders’ Representative fails to deliver its notice of objections no later than fifteen (15) days after receipt of the Closing Date Statement, the Stockholders will be deemed to have accepted Sunrise’s calculation. If the Principal Stockholders’ Representative delivers a notice of objections no later than such fifteen (15) day period, the Principal Stockholders’ Representative and Sunrise will endeavor in good faith to resolve any disputed matters no later than fifteen (15) days after receipt of the Principal Stockholders’ Representative’s notice of objections. If the Principal Stockholders’ Representative and Sunrise are unable to resolve the disputed matters, the Principal Stockholders’ Representative and Sunrise will appoint the Independent Accountants to resolve the matters in dispute in a manner consistent with this Section 3.08(b) , and the determination of such firm in respect of the correctness of each matter remaining in dispute will be final, binding and conclusive on the Stockholders and Sunrise. The determination of the Independent Accountants will be based solely on presentations by the Principal Stockholders and Sunrise and will not be by independent review. The fees and expenses of the Independent Accountants will be paid one-half by the Principal Stockholders and one-half by Sunrise. The Working Capital as of the Closing Date, as finally determined pursuant to this Section 3.08(b) (whether by failure of Sunrise to deliver the Closing Date Statement, whether by failure of the Principal Stockholders’ Representative to deliver notice of objections, by agreement of the Principal Stockholders’ Representative and Sunrise or by determination of the Independent Accountants), is referred to herein as the “ Final Working Capital ”.

          (c) If the Final Working Capital is less than the Estimated Working Capital, the amount of the difference between the Estimated Working Capital and the Final Working Capital shall be paid by the Principal Stockholders to Sunrise. Any amounts payable by the Principal Stockholders pursuant to this Section 3.08(c) will be made not later than five (5) Business Days after the determination of the Final Working Capital by wire transfer of immediately available funds to an account designated in advance in writing by Sunrise. If the Final Working Capital is greater than the Estimated Working Capital, the amount of the difference between the Final Working Capital and the Estimated Working Capital (the “ Final Working Capital Payment ”) shall be paid by Sunrise to the Principal Stockholders’ Representative, on behalf of the Stockholders to be distributed by the Principal Stockholders’ Representative as follows: first, to the former holders of Class A-1-B1 Preferred Stock and Class A-1-B2 Preferred Stock, on a pro rata and pari passu basis, until the sum of the Class A-1-B1 Preferred Stock Liquidation Amount and Class A-1-B2 Preferred Stock Liquidation Amount allocable to such holders is paid in full and the remainder (if any) to former holders of Company Common Stock. For the purposes of the previous sentence, only Stockholders holding such shares immediately prior to the Effective Time shall receive any distribution of the Final Working Capital Payment. Any amounts payable by Sunrise pursuant to this Section 3.08(c) will be made not later than five (5) Business Days after the determination of the Final Working Capital by wire transfer of immediately available funds to an account designated in advance in writing by the Principal Stockholders’ Representative.

          (d) After Closing, Sunrise will, and will cause the employees and agents of Sunrise and the Acquired Companies to, provide the Principal Stockholders’ Representative, its accountants and the Independent Accountants access at all reasonable times to the personnel and the books of account and other books, accounts receivable information, customer records, financial records and other business records of the Acquired Companies for the purpose of verifying the accuracy of the Closing Date Statement or in connection with any dispute under this Section 3.08 , as reasonably appropriate.

      3.09. Medicare Cap Liability Escrow Amount Determination.

          (a) On August 28, 2006 (or, such other date as is between 10 to 14 days prior to the Closing Date), the Company shall deliver to Sunrise a good faith written estimate of the Medicare Cap Liability Escrow Amount as of the date that is two (2) Business Days prior to the delivery date specified above (the “ First Estimated Medicare Cap Liability Escrow Amount ”) setting forth in reasonable detail the Company’s calculation of the appropriate reserve for Medicare Cap Liability, as determined in accordance with GAAP and consistent with past practices, as of the above-specified measurement date, and any supporting documentation relevant to such calculation. The Acquired Companies shall promptly provide Sunrise with such information as Sunrise reasonably requests to verify the calculation of the First Estimated Medicare Cap Liability Escrow Amount.

          (b) Not less than three (3) Business Days prior to the Closing Date, the Company shall deliver to Sunrise a good faith written estimate of the Medicare Cap Liability Escrow Amount as of the Closing Date (the “ Medicare Cap Liability Escrow Amount ”) setting forth in reasonable detail the Company’s calculation of the appropriate reserve for Medicare Cap Liability, as determined in accordance with GAAP and consistent with past practices, and substantially consistent with the calculation of the First Estimated Medicare Cap Liability Escrow Amount, as of the Closing Date, and any supporting documentation relevant to such calculation. The Acquired Companies shall promptly provide Sunrise with such information as Sunrise reasonably requests to verify the calculation of the Medicare Cap Liability Escrow Amount. The Medicare Cap Liability Escrow Amount shall be deposited into the Escrow Account on the Closing Date pursuant to Section 3.01(b) .

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS

     Each of the KRG Stockholders and the Company, jointly and severally, hereby make the following representations and warranties to Sunrise and Merger Sub in this Article 4 , other than the representations and warranties in Sections 4.01(b), 4.02(b), 4.03(b), 4.04(b), 4.19(b), 4.26(b), 4.32(b), 4.34(b), 4.35(b) and 4.37(b) .

     The ACS Stockholder hereby makes the representations and warranties to Sunrise and Merger Sub in Sections 4.01(b), 4.02(b), 4.03(b), 4.04(b), 4.19(b), 4.26(b), 4.32(b), 4.34(b), 4.35(b) and 4.37(b) .

      4.01. Organization and Good Standing.

          (a) Each KRG Stockholder is duly organized, validly existing and in good standing (or equivalent status) under the Laws of the state of its organization, and has all power and authority to own, lease and operate its properties and assets and to carry on its business as now conducted. Each KRG Stockholder is duly qualified to do business as a limited partnership and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Affect. Each KRG Stockholder’s certificate of limited partnership or certificate of formation, as applicable, and partnership agreement, are in full force and effect and no other organizational documents are applicable to or binding upon such KRG Stockholder.

          (b) The ACS Stockholder is a Delaware corporation, duly organized, validly existing and in good standing under the Laws of the State of Delaware, and has all power and authority to own, lease and operate its properties and assets and to carry on its business as now conducted. The ACS Stockholder’s corporate governance documents are in full force and effect.

      4.02. Authorization.

          (a) Each of the KRG Stockholders and the Company has all power and authority to execute, deliver and perform such Person’s obligations under this Agreement and the other Transaction Documents to which it is a party and to consummate all of the Contemplated Transactions to which it is a party. The execution, delivery and performance by each of the KRG Stockholders and the Company of this Agreement and the other Transaction Documents to which it is a party, and the consummation by each of the KRG Stockholders and the Company of the Contemplated Transactions to which it is a party are within such Person’s powers and, if applicable, have been duly and validly authorized by all necessary action under such Person’s constituent documents and applicable provisions of the Laws of the jurisdiction of its organization. This Agreement has been, and each other Transaction Document to which it is a party will be, duly and validly executed and delivered by each of the KRG Stockholders and the Company, as applicable. This Agreement constitutes, and each other Transaction Document to which it is a party, when executed and delivered by the parties thereto, will constitute, a legal, valid and binding agreement of each of the KRG Stockholders and the Company enforceable against each of them in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors’ rights generally and for limitations imposed by general principles of equity.

          (b) The ACS Stockholder has all power and authority to execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party and to consummate all of the Contemplated Transactions to which it is a party. The execution, delivery and performance by the ACS Stockholder of this Agreement and the other Transaction Documents to which it is a party, and the consummation by the ACS Stockholder of the Contemplated Transactions to which it is a party are within its powers and have been duly and validly authorized by all necessary action under the ACS Stockholder’s corporate governance documents and applicable provisions of the Laws of the State of Delaware. This Agreement has been, and each other Transaction Document to which it is a party will be, duly

and validly executed and delivered by the ACS Stockholder. This Agreement constitutes, and each other Transaction Document to which the ACS Stockholder is a party, when executed and delivered by the parties thereto, will constitute, a legal, valid and binding agreement of the ACS Stockholder enforceable against it in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors’ rights generally and for limitations imposed by general principles of equity.

      4.03. Governmental Authorization.

          (a) The execution, delivery and performance by each of the KRG Stockholders and the Company of this Agreement and each other Transaction Document to which it is a party, and the consummation by each of the KRG Stockholders and the Company of the Contemplated Transactions do not and will not require any action by or in respect of, consent or approval of, or filing with, any Governmental Entity by or on behalf of any KRG Stockholder or any Acquired Company, other than (i) as set forth in Section 4.03(a) of the Disclosure Schedule, (ii) approval of the Company’s board of directors of the Merger, as contemplated in Section 4.29 , (iii) the Stockholder Approval and (iv) the filing and acceptance for record of the Certificate of Merger in accordance with the DGCL.

          (b) The execution, delivery and performance by the ACS Stockholder of this Agreement and each other Transaction Document to which it is a party, and the consummation by the ACS Stockholder of the Contemplated Transactions do not and will not require any action by or in respect of, consent or approval of, or filing with, any Governmental Entity or by or on behalf of the ACS Stockholder, other than (i) the Stockholder Approval and (ii) the filing and acceptance for record of the Certificate of Merger in accordance with the DGCL.

      4.04. Non-contravention.

          (a) Except as set forth in Section 4.04(a) of the Disclosure Schedule, the execution, delivery and performance by each of the KRG Stockholders and the Company of this Agreement and each other Transaction Document to which it is a party, and the consummation by each of the KRG Stockholders and the Company of the Contemplated Transactions to which it is a party do not and will not (i) contravene or conflict with the constituent documents of any KRG Stockholder or any Acquired Company, (ii) contravene or conflict with or constitute a violation of any provision of any Law binding upon or applicable to any KRG Stockholder or any Acquired Company or any of their respective properties or assets, except for such violations that would not, individually or in the aggregate, have a Material Adverse Effect, (iii) constitute a material default under or give rise to a right of termination, cancellation or acceleration of any material right or obligation of any KRG Stockholder or any Acquired Company or to a loss of any material benefit to which any KRG Stockholder or any Acquired Company is entitled under any provision of any Contract or other instrument binding upon any KRG Stockholder or any Acquired Company or any of their respective properties or assets or any license, franchise, Permit or other similar authorization held by any KRG Stockholder or any Acquired Company, or (iv) result in the creation or imposition of any Lien (other than a Permitted Lien) on any property or asset of any KRG Stockholder or any Acquired Company. Except as set forth in Section 4.04(a) of the Disclosure Schedule, no KRG Stockholder or Acquired Company is or will be required to give any notice to or obtain any consent, approval, waiver, ratification or

other authorization from any Person in connection with the execution and delivery of this Agreement or each other Transaction Document to which such Person is a party or the consummation or performance of any of the Contemplated Transactions to which such Person is a party.

          (b) Except as set forth in Section 4.04(b) of the Disclosure Schedule, the execution, delivery and performance by the ACS Stockholder of this Agreement and each other Transaction Document to which it is a party, and the consummation by the ACS Stockholder of the Contemplated Transactions to which it is a party do not and will not (i) contravene or conflict with the constituent documents of the ACS Stockholder, (ii) contravene or conflict with or constitute a violation of any provision of any Law binding upon or applicable to the ACS Stockholder or any of its properties or assets, except for such violations that would not, individually or in the aggregate, have a Material Adverse Effect, (iii) constitute a material default under or give rise to a right of termination, cancellation or acceleration of any material right or obligation of the ACS Stockholder or to a loss of any material benefit to which the ACS Stockholder is entitled under any provision of any Contract or other instrument binding upon the ACS Stockholder or any of its properties or assets or any license, franchise, Permit or other similar authorization held by the ACS Stockholder, or (iv) result in the creation or imposition of any Lien (other than a Permitted Lien) on any property or asset of the ACS Stockholder. Except as set forth in Section 4.04(b) of the Disclosure Schedule, the ACS Stockholder is not and will not be required to give any notice to or obtain any consent, approval, waiver, ratification or other authorization from any Person in connection with the execution and delivery of this Agreement or each other Transaction Document to which such Person is a party or the consummation or performance of any of the Contemplated Transactions to which such Person is a party.

      4.05. Acquired Companies.

          (a) Each Acquired Company is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing (or equivalent status) under the Laws of its jurisdiction of organization, has all corporate, limited liability company or limited partnership power, as the case may be, and authority to own, lease and operate its properties and assets and to carry on its business as now conducted and is duly qualified to do business as a foreign corporation, limited liability company or limited partnership and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary and where the failure to be so qualified could reasonably be expected to have a Material Adverse Effect. Section 4.05(a) of the Disclosure Schedule identifies each Acquired Company, its respective jurisdiction of organization and each jurisdiction in which such Acquired Company is qualified to do business as a foreign corporation, limited liability company or limited partnership. The Acquired Companies have made available to Sunrise true and complete copies of each Acquired Companies’ certificate of incorporation, certificate of formation or certificate of limited partnership, as applicable, and bylaws, partnership agreement or limited liability company agreement, as applicable. Such documents are in full force and effect and no other organizational documents are applicable to or binding upon the Acquired Companies.

          (b) The board of directors of the Company has, prior to the execution and delivery of this Agreement, unanimously (i) determined that the adoption of the Charter

Amendment is in the best interests of the stockholders of the Company; (ii) adopted and approved the Charter Amendment; (iii) directed that the Charter Amendment be submitted to the Stockholders entitled to vote thereon for consideration and approval at a meeting or by written consent in accordance with the DGCL; and (iv) resolved to recommend and recommended the approval of the Charter Amendment by the Stockholders entitled to vote thereon in accordance with the DGCL. Section 4.05(b) of the Disclosure Schedule sets forth the Stockholder vote required for the approval of the Charter Amendment ( the “ Stockholder Charter Amendment Approval ”). The Stockholder Charter Amendment Approval is the only vote, approval or other corporate action of the holders of any class or series of Company Capital Stock necessary to approve, authorize and adopt the Charter Amendment, except for the consent of the ACS Stockholder as lender under the loan agreement described in Section 4.16 of the Disclosure Schedule (which consent has been obtained). After receipt of the Stockholder Charter Amendment Approval, no vote, approval or other corporate action on the part of any holder of any capital stock or other security of the Company is required to approve or adopt the Charter Amendment. The Stockholder Charter Amendment Approval has been obtained by the written consent of the holders of each class of Company Capital Stock and delivered to Sunrise concurrently with the execution and delivery of this Agreement.

      4.06. Capitalization.

          (a) The authorized capital stock of the Company consists of 2,000,000 shares of Company Common Stock (consisting of 1,900,000 shares of Class A Common Stock, of which 1,159,330 shares are issued and outstanding and 100,000 shares of Class B Common Stock of which 44,000 shares are issued and outstanding) and a series of 200,000 shares of Class A-1-A1 Preferred Stock, of which 35,690 shares are issued and outstanding; a series of 100,000 shares of Class A-1-A2 Preferred Stock, of which 6,198 shares are issued and outstanding; a series of 1,000,000 shares of Class A-1-B1 Preferred Stock, of which 864,310 shares are issued and outstanding; a series of 300,000 shares of Class A-1-B2 Preferred Stock, of which 197,132 shares are issued and outstanding; a series of 200,000 shares of Class B-1 Preferred Stock, of which 74,408 shares are issued and outstanding; a series of 1,725,000 shares of Class I Preferred Stock, of which 575,000 are shares issued and outstanding; and a series of 1,000,000 shares of Class II Preferred Stock, all of which are issued and outstanding. Section 4.06(a) of the Disclosure Schedule sets forth the number of authorized and outstanding shares of capital stock or other Equity Interests, and the ownership thereof, of each of the Acquired Companies.

          (b)  Section 4.06(b) of the Disclosure Schedule sets forth a correct and complete list of the name of each holder of Company Capital Stock, by class, and the number of shares of each class of Company Capital Stock held by such holder. Except for the Equity Interests set forth in Sections 4.06(a), 4.06(b) and 4.06(c) of the Disclosure Schedule, there are no other outstanding Equity Interests in any Acquired Company.

          (c) Except as set forth in Section 4.06(c) of the Disclosure Schedule, there are no outstanding or authorized options, warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights or other agreements or commitments to which any Person or Acquired Company is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock, membership interests, units or partnership

interests or other equivalent Equity Interests, as applicable, of any Acquired Company. Except as set forth in Section 4.06(c) of the Disclosure Schedule, there are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock, membership interests or partnership interests or other equivalent Equity Interests, as applicable, of any Acquired Company.

          (d) Except as set forth in Section 4.06(d) of the Disclosure Schedule, no Acquired Company owns, directly or indirectly, any Equity Interest in any Person, and no Acquired Company is obligated to purchase any Equity Interest, or make any investment (in the form of a loan, capital contribution or otherwise), in any Person. Except as set forth in Section 4.06(d) of the Disclosure Schedule and in this Agreement, there are no outstanding Contracts or other rights to subscribe for or purchase, or Contracts or other obligations to issue, sell or grant any rights to acquire, any Equity Interests in any Acquired Company. Except for this Agreement, there are no outstanding Contracts of any Principal Stockholder or Acquired Company (i) to repurchase, redeem or otherwise acquire, or affecting the voting rights of any Equity Interests of any Acquired Company (including voting agreements, voting trusts and shareholder agreements), (ii) requiring the registration for sale of, any Equity Interests of any Acquired Company, or (iii) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of Equity Interests of any Acquired Company. Except as set forth in Section 4.06(d) of the Disclosure Schedule, there are no issued and outstanding bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the stockholders, members or owners of any Acquired Company may vote.

          (e) All of the Equity Interests of any Acquired Company are duly authorized, validly issued and outstanding and are fully paid. There are no preemptive or similar rights (under Contract or otherwise) in respect of any Equity Interests of any Acquired Company. The offer, sale and issuance of the Equity Interests have been made in compliance with all applicable federal securities Laws and state securities or “blue sky” Laws. None of the Equity Interests are required to be registered under the Securities Act. No Principal Stockholder or Acquired Company has ever offered or sold any Equity Interest in any Acquired Company to any Person other than the Principal Stockholder that currently holds the Equity Interests in such Acquired Company as listed in Section 4.06(e) of the Disclosure Schedule.

          (f) To the Knowledge of the Acquired Companies, no Acquired Company has received and shall not receive any funds for investment purposes from any investor that is, or acts on behalf of (i) an “employee benefit plan” as defined in Section 3(3) of ERISA, whether or not such plan is subject to ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or (iii) an entity whose underlying assets include employee benefit plan assets by reason of an employee benefit plan’s investment in the entity.

      4.07. Financial Statements.

          The audited consolidated financial statements of the Acquired Companies for the fiscal year ended December 31, 2004, and the unaudited consolidated financial statements of the Acquired Companies for the fiscal year ended December 31, 2005 and for the six months ended June 30, 2006, each as set forth in Section 4.07 of the Disclosure Schedule (the “ Financial

Statements ”) fairly present, in conformity with GAAP (except as may be indicated in the notes thereto, or in the case of such unaudited consolidated statements which do not contain footnotes, subject to normal year-end adjustments), the consolidated financial position of the Acquired Companies as of the dates thereof and their consolidated results of operations and cash flows and changes in financial position for the periods then ended. The Financial Statements are consistent in all material respects with the Books and Records of the Acquired Companies. For purposes of this Agreement, the “ 2005 Trinity Balance Sheet ” means the unaudited consolidated balance sheet of the Acquired Companies as of December 31, 2005, the “ June 2006 Trinity Balance Sheet ” means the unaudited consolidated balance sheet of the Acquired Companies as of June 30, 2006, and the “ Trinity Balance Sheet Date ” means June 30, 2006.

      4.08. Absence of Certain Changes.

          Except as set forth in Section 4.08 of the Disclosure Schedule, since the Trinity Balance Sheet Date, the Acquired Companies have conducted their business in the Ordinary Course of Business and there has not been:

          (a) any event, occurrence or development of a state of circumstances or facts which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect;

          (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any Equity Interest of any Acquired Company (other than dividends or distributions in cash in an amount consistent with the requirements of this Agreement), any split, combination or reclassification of any Equity Interest of any Acquired Company, or any repurchase, redemption or other acquisition by any Acquired Company of any outstanding Equity Interests of such Acquired Company;

          (c) any amendment of any term of any outstanding Equity Interest of any Acquired Company;

          (d) any incurrence, assumption or guarantee by any Acquired Company of any Debt;

          (e) any creation or assumption by any Acquired Company of any Lien on any asset, except for Permitted Liens;

          (f) any making of any loan, advance or capital contributions to or investment (other than investments in cash or cash equivalents in the Ordinary Course of Business) in any Person other than (i) loans, advances or capital contributions to or investments in other wholly-owned Acquired Companies made in the Ordinary Course of Business and (ii) routine salary, travel and expense advances to Trinity Employees in the Ordinary Course of Business;

          (g) any material damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of any Acquired Company;

          (h) any (i) transaction or commitment made, or any Contract entered into, by any Acquired Company relating to its assets or business (including the acquisition or disposition

of any assets) that involved the acquisition or disposition of assets other than for fair value or that involved an amount in excess of Twenty-Five Thousand Dollars ($25,000), or (ii) relinquishment by any Acquired Company of any material Contract or other right;

          (i) any change in any method of accounting or accounting practice not required by GAAP by any Acquired Company or any Tax election;

          (j) any (i) increase in, acceleration of or provision for compensation, benefits (fringe or otherwise) or other rights to any Trinity Employee except in the Ordinary Course of Business, (ii) grant, agreement to grant, or amendment or modification of any grant or agreement to grant, any severance, termination, retention or similar payment to any Trinity Employee, (iii) loan or advance of money or other property by any Acquired Company to any Trinity Employee, (iv) establishment, adoption, entrance into, amendment or termination of any Trinity Plan, collective bargaining agreement or other labor agreement or (v) grants of any equity or equity-based awards;

          (k) any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of any Acquired Company, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to such employees; or

          (l) any cancellation, revocation, suspension of, or any moratorium or other adverse action against or with respect to, any Operating Licenses, Permits or similar agreements to which any Acquired Company is a party, or any written notification to any Acquired Company that any party to any such arrangements intends to cancel, revoke, suspend, not renew or take any other adverse action against such arrangements.

      4.09. No Undisclosed Liabilities.

          Except as set forth on the June 2006 Trinity Balance Sheet, there are no material Liabilities of any Acquired Company of any kind whatsoever of the type required to be reflected on a balance sheet prepared in accordance with GAAP, other than:

          (a) contingent Liabilities, which, in accordance with GAAP, are not required to be reflected on a balance sheet; and

          (b) Liabilities incurred since the Trinity Balance Sheet Date in the Ordinary Course of Business or in connection with this Agreement or the other Transaction Documents.

      4.10. Litigation.

          Except as set forth in Section 4.10 of the Disclosure Schedule, (a) there is no action, suit, hearing, arbitration, administrative or other proceeding, audit or investigation pending against, or, to the Knowledge of the Acquired Companies, threatened against any Acquired Company, its Business, or any of their respective Programs or assets, and (b) no Acquired Company nor any asset of any Acquired Company is subject to any Order or settlement agreement. Other than as set forth in Section 4.10 of the Disclosure Schedule, since June 20,

2002, no Governmental Entity, nor to the Knowledge of the Acquired Companies, any other Person, has at any time commenced or given notice of intention to commence any investigation relating to the legal right of any Acquired Company to conduct the Business as now or heretofore conducted by such Acquired Company or to consummate any of the Contemplated Transactions.

      4.11. Taxes.

          Except as set forth in the 2005 Trinity Balance Sheet:

          (a) All Taxes owed by the Acquired Companies (whether or not shown on any Tax Return) have been paid or will be timely paid for all periods ending on or prior to the Closing Date. Each of the Acquired Companies has properly and timely filed and will, prior to the Closing, properly and timely file all Tax Returns they were required to file. None of the Acquired Companies is the beneficiary of any extension of time within which to file any Tax Return. Since June 20, 2002, no claim has ever been made by a Governmental Entity in a jurisdiction where the Acquired Companies do not file Tax Returns that the Acquired Companies are or may be subject to taxation by that jurisdiction. There are no Liens on any of the assets of the Acquired Companies that arose in connection with any failure (or alleged failure) to pay any Tax.

          (b) Each of the Acquired Companies has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, creditor, stockholder, or other third Person, and all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed.

          (c) To the Knowledge of each KRG Stockholder, Acquired Company or any officer or director (or employee responsible for Tax matters) of the Acquired Companies, no Governmental Entity is expected to assess additional Taxes against an Acquired Company for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of the Acquired Companies either (i) claimed or raised by any Governmental Entity in writing or (ii) as to which KRG Stockholders or the directors and officers (and employees responsible for Tax matters) of the Acquired Companies has Knowledge based upon personal contact with any agent of such Governmental Entity.

          (d) None of the Acquired Companies has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

          (e) The unpaid Taxes of the Acquired Companies (i) did not, as of the Trinity Balance Sheet Date, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the June 2006 Trinity Balance Sheet and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Acquired Companies in filing their Tax Returns.

          (f) None of the Acquired Companies are a party to any Tax allocation or sharing agreement and no Acquired Company since June 20, 2002 (i) has been a member of an affiliated group (within the meaning of Section 1504(a) of the Code or any similar provision of

state, local or foreign Law) filing a consolidated federal income Tax Return or (ii) has any Liability for the Taxes of any Person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local, or foreign Law), as a transferee or successor, by contract, or otherwise.

          (g) No Acquired Company is a party to any agreement, Contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of state or local Tax law). No Acquired Company has filed a consent under former Section 341(f) of the Code concerning collapsible corporations. No Acquired Company is a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

          (h) Each of the Acquired Companies set forth in Section 4.11(h) of the Disclosure Schedule has, in the case of the Company since its formation and, in the case of each of the other Acquired Companies, since each has been owned by the Company, been treated as disregarded for U.S. federal income tax purposes.

          (i) None of the Acquired Companies will be required to include any item of income in, or exclude any item of deduction from, taxable income for any Pre-Closing Tax Period or Pre-Closing Partial Tax Period as a result of any:

               (i) change in method of accounting for a Pre-Closing Tax Period;

               (ii) closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state or local Tax law) executed on or before the Closing Date;

               (iii) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state or local Tax law);

               (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or

               (v) prepaid amount received on or prior to the Closing Date.

      4.12. ERISA.

          (a)  Section 4.12 of the Disclosure Schedule contains a true and complete list of each Trinity Plan. “ Trinity Plan ” means each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), including multiemployer plans within the meaning of Section 3(37) of ERISA), and all stock purchase, stock option, severance, employment, change-in-control, retention, termination, fringe benefit, collective bargaining, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, and each amendment thereto, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the Contemplated Transactions or otherwise),

whether formal or informal, oral or written, under which (i) any current or former director, officer, manager, employee, agent, partner or consultant of any Acquired Company (collectively, the “ Trinity Employees ”) has any present or future right to benefits and which are contributed to, sponsored by or maintained by any Acquired Company or (ii) any Acquired Company has had or has any present or future Liability.

          (b) With respect to each Trinity Plan, the Acquired Companies have made available to Sunrise a current, accurate and complete copy or, with respect to unwritten Trinity Plans, description thereof and, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent determination letter; (iii) any summary plan description and other material written communications by any Acquired Company to the Trinity Employees concerning the extent of the benefits provided under a Trinity Plan; (iv) a summary of any proposed amendments or changes anticipated to be made to the Trinity Plans at any time within the twelve months immediately following the date hereof; (v) for the fiscal years ended December 31, 2004, 2003 and 2002 (A) the Form 5500 and attached schedules, (B) unaudited financial statements and (C) actuarial valuation reports, if any, and (vi) all correspondence, rulings, or opinions issued by the U. S. Department of Labor or the U.S. Internal Revenue Service. Each of the Trinity Plans can be amended, modified or terminated within a period of thirty (30) days without payment of any additional compensation or amount or the additional vesting or acceleration of any such benefits, except to the extent that such vesting is required under the Code upon the complete or partial termination of any Trinity Plan intended to be qualified within the meaning of Code Section 401(a).

          (c) No Trinity Plan is subject to Title IV of ERISA or is otherwise a Defined Benefit Plan as defined in ERISA Section 3(35) and no Acquired Company, nor any member of their “ Controlled Group ” (defined as any organization which is a member of a controlled group of organizations within the meaning of Section 414(b), (c), (m) or (o) of the Code) has incurred any material Liability pursuant to Title IV of ERISA that remains unsatisfied.

          (d) (i) Each Trinity Plan has been established and administered substantially in accordance with its terms and is in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable Laws; (ii) each Trinity Plan which is intended to be “qualified” within the meaning of Code Section 401(a) has been determined by the Internal Revenue Service to be so qualified and, to the Knowledge of the Acquired Companies, nothing has occurred which reasonably could be expected to adversely affect such qualified status, (iii) no event has occurred and no condition exists with respect to any Trinity Plan subject to the requirements of Code Section 401(a) that would subject any Acquired Company, either directly or by reason of their affiliation with any member of their Controlled Group, to any material Tax, fine, Lien, penalty or other Liability imposed by ERISA, the Code or other applicable Laws; and (iv) for each Trinity Plan with respect to which a Form 5500 has been filed, no material adverse change has occurred with respect to the matters covered by the most recent Form 5500 since the date thereof.

          (e) No Trinity Plan is or has been a multiemployer plan within the meaning of ERISA Section 3(37) (a “ Multiemployer Plan ”). No Acquired Company nor any member of their Controlled Group has completely or partially withdrawn from any Multiemployer Plan. No termination Liability to the Pension Benefit Guaranty Corporation or withdrawal Liability to any

Multiemployer Plan that is material in the aggregate has been or is reasonably expected to be incurred with respect to any Multiemployer Plan by any Acquired Company nor any member of their Controlled Group.

          (f) Except as set forth in Section 4.12(f) of the Disclosure Schedule, no Trinity Plan is an ESOP (within the meaning of Section 4975(e)(7) of the Code) or otherwise invests in employer securities (as such term is defined in Section 409(l) of the Code) or is a Voluntary Employees’ Beneficiary Association within the meaning of Section 501(c)(9) of the Code.

          (g) No Acquired Company, nor, to the Knowledge of the Acquired Companies, any other “disqualified person” or “party in interest”, as defined in Code Section 4975 and ERISA Section 3(14), respectively, has engaged in any “prohibited transaction”, as defined in Code Section 4975 or ERISA Section 406, with respect to any Trinity Plan, nor, to the Knowledge of the Acquired Companies, have there been any fiduciary violations under ERISA which could subject any Acquired Company (or any officer, director or employee thereof) to any material penalty or tax under ERISA Section 502(i) or Code Sections 4971 and 4975.

          (h) With respect to any Trinity Plan, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of the Acquired Companies, threatened, (ii) to the Knowledge of the Acquired Companies, no facts or circumstances exist that would be reasonably likely to give rise to any such actions, suits or claims, in either case where such actions, suits or claims would reasonably be expected to result in an unfunded Liability to any Acquired Company and (iii) no filing, application or other matter is pending with the U.S. Internal Revenue Service, the U.S. Department of Labor or any other Governmental Entity.

          (i) Except as set forth in Section 4.12(i) of the Disclosure Schedule, no Trinity Plan exists that, as a result of the execution or performance of this Agreement (whether alone or in connection with any subsequent event(s)), would be reasonably likely to result in (i) the payment to any Trinity Employee of any money or other property, (ii) the provision of any benefits or other rights to any Trinity Employee or (iii) the increase, acceleration or provision of any payments, benefits or other rights to any Trinity Employee, whether or not any such payment, right or benefit would constitute a “parachute payment” within the meaning of Section 280G of the Code. No amount so disclosed is an “excess parachute payment” within the meaning of Code Section 280G.

          (j) No Acquired Company has any Liability in respect of post-retirement health, medical or life insurance benefits for retired, former or current employees of any Acquired Company, except for coverage required under Section 4980B of the Code.

          (k) There has been no amendment to, written interpretation or announcement (whether or not written) by any Acquired Company or any of their respective Affiliates relating to, or change in employee participation or coverage under, a Trinity Plan which would increase the expense of maintaining such Trinity Plan above the level of the expense incurred in respect thereof for the fiscal year ended December 31, 2005.

      4.13. Labor Matters.

          (a) Except as set forth in Section 4.13(a) of the Disclosure Schedule, there are no (i) labor strikes, disputes, slowdowns, representation or certification campaigns, work stoppages or other concerted activities with respect to employees of any Acquired Company pending or, to the Knowledge of the Acquired Companies, threatened against or affecting any Acquired Company, any of which could materially adversely affect the operations of the Business (ii) grievance or arbitration proceedings, decisions, union and labor side letters, union and labor letter agreements, letters of understanding or settlement agreements, or (iii) activities and proceedings of any labor union or employee association to organize any such employees.

          (b) Except to the extent set forth in Section 4.13(b) of the Disclosure Schedule, there are no pending administrative matters with any Governmental Entity regarding (i) violations or alleged violations of any federal, provincial, state or local wage and hour Law or any federal, provincial, state or local Law with respect to discrimination on the basis of race, color, creed, national origin, religion or any other basis under such federal, provincial, state or local Law, (ii) any claimed violation of Title VII of the 1964 Civil Rights Act, as amended, (iii) any allegation or claim arising out of Executive Order 11246 or any other applicable order relating to governmental contractors or state contractors or (iv) any violation or alleged violation of the Age Discrimination and Employment Act, as amended, or any other federal, provincial, state or local statute or ordinance, or any other applicable Laws with respect to wages, hours, employment practices and terms and conditions of employment, any of which would constitute a Material Adverse Effect.

          (c) No Acquired Company is a party to or subject to, or is currently negotiating in connection with entering into, any collective bargaining agreement or other contract or understanding with a labor union or labor organization.

      4.14. Compliance with Laws.

          The operation of the Business has been and continues to be in compliance with all Laws applicable to such operations, except as set forth in Section 4.14 of the Disclosure Schedule, and except for such noncompliance as would not individually, or in the aggregate, have a Material Adverse Effect. Except to the extent set forth in Section 4.14 of the Disclosure Schedule, each KRG Stockholder and each Acquired Company has complied with all Laws affecting the conduct of the Business or any Program, except for such noncompliance as would not individually, or in the aggregate, have a Material Adverse Effect. Except to the extent set forth in Section 4.14 of the Disclosure Schedule, to the Knowledge of the Acquired Companies, (a) no Acquired Company is under investigation with respect to any violation of any Laws applicable to the Acquired Companies, and (b) no Acquired Company has been threatened to be charged with or received notice of any violation of any Laws applicable to any Acquired Company, except for such investigations or violations that would not, individually or in the aggregate, have a Material Adverse Effect. It is the intent of the parties that this representation and warranty will not apply to matters related to Taxes, employee benefit matters and environmental matters which are the subjects of Sections 4.11, 4.12 and 4.18 , respectively.

      4.15. Licenses and Permits.

           Section 4.15 of the Disclosure Schedule contains a true and complete list of all Operating Licenses and all other material Permits held by the Acquired Companies. The Acquired Companies have made available to Sunrise true and complete copies of each of the Operating Licenses and material Permits listed in Section 4.15 of the Disclosure Schedule. Each Acquired Company owns, holds or possesses all Operating Licenses and other material Permits (and has held since June 20, 2002 all Operating Licenses and other material Permits) that are required by any Governmental Entity or Law to permit it to conduct the Business of such Acquired Company and to develop, operate and manage the Programs. The Acquired Companies holding Operating Licenses or other material Permits to conduct the Business, are in material compliance with all such Operating Licenses and other material Permits. All such Operating Licenses and other material Permits are valid and in full force and effect. No Acquired Company is in default or violation of any Operating License or other material Permit. To the Knowledge of the Acquired Companies, no condition exists that with notice or lapse of time or both would constitute a default or violation under, any Operating License or other material Permit held by the Acquired Companies. To the Knowledge of the Acquired Companies, there is no pending or threatened action, investigation or proceeding with respect to revocation, cancellation, suspension or nonrenewal of any such Operating License or other material Permit of any Acquired Company. None of the KRG Stockholders or the Acquired Companies has received notice from any Governmental Entity (a) asserting the violation of the terms of any such Operating License or other material Permit, (b) threatening to revoke, cancel, suspend or not renew the terms of any such Operating License or other material Permit or (c) seeking to impose fines, penalties or other sanctions for violation of the terms of any such Operating License or other material Permit, except as set forth in Section 4.14 of the Disclosure Schedule.

      4.16. Contracts.

          (a)  Section 4.16(a) of the Disclosure Schedule lists the following Contracts to which any Acquired Company is a party:

               (i) Contracts that (A) involved aggregate expenditures or receipts in excess of Twenty-Five Thousand Dollars ($25,000) in the aggregate in fiscal year 2005 or (B) are expected to involve aggregate expenditures or receipts in excess of Twenty-Five Thousand Dollars ($25,000) in the aggregate in fiscal year 2006;

               (ii) joint venture, partnership and like Contracts or other Contracts involving the sharing of profits or losses;

               (iii) Contracts containing covenants purporting to limit (or that would limit after the Closing Date) the freedom of any Acquired Company or any Affiliate of any Acquired Company to compete in any line of business or with any Person in any geographic area;

               (iv) Contracts which contain minimum purchase commitments of greater than Twenty-Five Thousand Dollars ($25,000) in the aggregate in any twelve (12) month period;

               (v) Contracts relating to any outstanding non-cancelable commitment for capital expenditures of any Acquired Company in excess of Twenty-Five Thousand Dollars ($25,000) in the aggregate in any twelve (12) month period;

               (vi) indentures, mortgages, promissory notes, loan agreements, guarantees, letters of credit or other agreements or instruments of any Acquired Company with commitments for the borrowing or the lending of amounts, by any Acquired Company;

               (vii) any Contract, note or bond under which any Acquired Company has, directly or indirectly, made any advance, loan, extension of credit or capital contribution to, or other investment in, any Person;

               (viii) any Contract creating or granting any Lien upon any of the properties or assets of any Acquired Company;

               (ix) any currently effective Contract, or any Contract that has expired or been terminated since June 20, 2002, which has surviving provisions, providing for indemnification of any Person with respect to Liabilities relating to any current or former business of any Acquired Company or any predecessor Person;

               (x) any lease, sublease or similar Contract with any Person under which any Acquired Company is a lessor or sublessor of, or makes available for use to any person, (A) any Leased Real Property or (B) any portion of any premises otherwise occupied by any Acquired Company;

               (xi) any Contract relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise);

               (xii) any Contract (other than any Permit) with any Governmental Entity or with any labor union, including Contracts with any Governmental Entity regarding participation in a Government Program;

               (xiii) any Contract containing a most favored customer clause or similar provision;

               (xiv) all outstanding powers of attorney empowering any Person to act on behalf of any Acquired Company;

               (xv) each health insurance benefit agreement with the U.S. Department of Health and Human Services;

               (xvi) each Medicare or Medicaid provider agreement;

               (xvii) each managed care or other third party payor Contract (e.g., private insurance carriers or health maintenance organizations);

               (xviii) each Contract or grant from any other governmental payment program (e.g., assistance for the elderly or treatment of persons with AIDS);

               (xix) each Contract with any hospital, physician, nursing facility, home health entity, laboratory, physical therapy/rehabilitative services provider, hospice, durable medical equipment provider or pharmacy or any other Person involving patient care, including physical therapy and home care;

               (xx) each Contract with any referral source;

               (xxi) each Customer Contract: and

               (xxii) any other Contract that is material to any Acquired Company.

          (b) Complete and correct copies of all Contracts and amendments thereto referred to in this Section 4.16 have been made available to Sunrise by the Acquired Companies. All Contracts referred to in this Section 4.16 are valid, binding and in full force and effect upon the Acquired Companies, and, to the Knowledge of the Acquired Companies, are valid, binding and in full force and effect upon the other party or parties to all such Contracts referred to in Section 4.16 , and are enforceable by the Acquired Companies in accordance with their terms, except as such enforcement is limited by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditor’s rights generally, and for limitations imposed by general principals of equity, and, except for amendments identified in Section 4.16(a) of the Disclosure Schedule, have not been modified, amended, nor any provision thereof waived and constitute the entire agreement between the parties thereto. Except as set forth in Section 4.16(b) of the Disclosure Schedule, no Acquired Company nor, to the Knowledge of the Acquired Companies, any other party thereto, is or is alleged to be in material violation of or in material default in respect of, nor has there occurred any event or condition which (with or without notice or lapse of time or both) would constitute a material violation of, material default under or give rise to a right of termination, cancellation or acceleration of any material right or obligation under any such Contract. Except as set forth in Section 4.16(b) of the Disclosure Schedule, none of the counterparties to any such Contracts has given written notice of termination of or is seeking to amend, any such Contract, nor to the Knowledge of the Acquired Companies, has any such counterparty given oral notice thereof.

          (c) No Acquired Company is a party to or, to the Knowledge of the Acquired Companies, is bound by any Contract with Trinity Hospice Foundation.

      4.17. Intellectual Property.

          (a) The Acquired Companies have identified in Section 4.17(a) of the Disclosure Schedule: (i) all common law trademarks and service marks that are owned or exclusively licensed by the Acquired Companies in connection with the Business; (ii) all registered trademarks and service marks and registered trade names, as well as all trademarks, service marks or trade names for which applications for registration have been filed, in each

case, that are owned or exclusively licensed by the Acquired Companies; (iii) all registered copyrights and applications for copyright registrations that are owned by the Acquired Companies; (iv) all issued patents, patent applications and invention disclosures that are owned or exclusively licensed by the Acquired Companies; (v) all domain names that are owned or exclusively licensed by the Acquired Companies; (vi) all software owned or used by the Acquired Companies in the conduct of the Business as presently conducted by the Acquired Companies (other than, with respect to such software and such software licenses, off-the-shelf commercial or shrinkwrap software for which the license fee is less than Five Thousand Dollars ($5,000)); and (vii) all software licenses granted to the Acquired Companies that relate to software used in the conduct of the Business as presently conducted by the Acquired Companies (other than, with respect to such software and such software licenses, off-the-shelf commercial or shrinkwrap software for which the license fee is less than Five Thousand Dollars ($5,000)). Except as identified in Section 4.17(a) of the Disclosure Schedule, to the Knowledge of the Acquired Companies, no software internally developed or used by an Acquired Company contains any open source or copyleft software.

          (b) Except as set forth in Section 4.17(b) of the Disclosure Schedule, (i) the Acquired Companies own or possess licenses or other rights to use all Intellectual Property Rights to the extent used by them in the conduct of the Business now operated by them, (ii) the Intellectual Property Rights owned by the Acquired Companies are free from Liens other than Permitted Liens and non-exclusive licenses granted to end user customers in the Ordinary Course of Business, (iii) no Acquired Company has granted to any third party any rights in any Intellectual Property Rights owned by the Acquired Companies, other than non-exclusive licenses granted to end user customers in the Ordinary Course of Business, (iv) the conduct of the Businesses of the Acquired Companies as presently conducted does not conflict with, infringe upon or misappropriate any Intellectual Property Rights of others and the Acquired Companies have not received any notice since June 20, 2002 alleging any such conflict, infringement or misappropriation, (v) to the Knowledge of the Acquired Companies, there is no legal action or proceeding pending against the Acquired Companies which challenges the legality, validity, enforceability, use or ownership of any Intellectual Property Rights owned or exclusively licensed by the Acquired Companies, and (vi) to the Knowledge of the Acquired Companies, the Intellectual Property Rights owned or exclusively licensed by the Acquired Companies are not being infringed upon or misappropriated by any third party. Each Acquired Company has taken all commercially reasonable action to maintain and protect its interest in the Intellectual Property Rights owned by such Acquired Company.

          (c) All software used by the Acquired Companies has been (i) licensed to the Acquired Companies, as applicable, (ii) developed by employees of the Acquired Companies within the scope of their employment, or (iii) developed by a third party and assigned to the Acquired Companies so that, in the case of clause (iii), the Acquired Companies are now the exclusive owner of such software. The Acquired Companies have not disclosed to any third party material confidential information of the Acquired Companies except pursuant to a Contract that governs the use or disclosure of confidential information of the Acquired Companies. Without limiting the foregoing, the Acquired Companies have, and enforce, a policy requiring each employee to execute an acknowledgement that such employee has received the content of the Company’s employee handbook/employee reference manual (the “ Employee Handbook ”). The Employee Handbook contains the proprietary information and confidentiality policy of the

Acquired Companies set forth in Section 4.17(c) of the Disclosure Schedule, and all current employees of the Acquired Companies have executed such an acknowledgement.

          (d) The consummation of the Contemplated Transactions will not result in the loss or impairment of any Intellectual Property Rights used by the Acquired Companies in the conduct of the Business now operated by the Acquired Companies, and each of such Intellectual Property Rights will be owned or available for use by the Acquired Companies on identical terms and conditions immediately subsequent to the Closing.

      4.18. Environmental Matters.

          (a) (i) No unresolved notice, notification, demand, Lien, request for information, citation, summons, complaint or Order has been received by any Acquired Company, and no penalty has been assessed and no action, claim, suit, proceeding, investigation or review is pending or, to the Knowledge of the Acquired Companies, threatened by any Governmental Entity or other Person against or directed at (as the case may be) any Acquired Company, and relating to or arising under any Environmental Law;

               (ii) There are no Liabilities of any Acquired Company under any Environmental Law of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there are no facts, circumstances or conditions, existing, initiated or occurring prior to the Closing Date which have resulted or may result in any such Liability, which, in either case, may have a Material Adverse Effect;

               (iii) The Acquired Companies are and have been in compliance in all material respects with all Environmental Laws and have obtained and are in compliance in all material respects with all applicable Environmental Permits and have timely filed all applications and renewals for all applicable Environmental Permits, and such Environmental Permits are valid and in full force and effect and will not be terminated or impaired or become terminable, in whole or in part, as a result of the Contemplated Transactions, and none require consent, notification, or other action to remain in full force and effect following consummation of the Contemplated Transactions, and all Environmental Permits held by the Acquired Companies are listed in Section 4.18(a)(iii) of the Disclosure Schedule;

               (iv) No Acquired Company has arranged, by Contract or otherwise, for the treatment, storage or disposal of Hazardous Substances at any location such that it is or will be liable for the Remediation of such location;

               (v) No Hazardous Substance has been Released at any property currently owned, operated, leased, developed or managed by any Acquired Company such that any Acquired Company is liable for Remediation of such Release;

               (vi) No Hazardous Substance has been Released at any property formerly owned, operated, leased, developed or managed by any Acquired Company during, or to the Knowledge of the KRG Stockholders, prior to, the Acquired Company’s ownership, operation, tenancy, development or management with respect to such property, such that any Acquired Company is liable for Remediation of such Release; and

               (vii) To the Knowledge of the Acquired Companies, except as set forth in Section 4.18(a)(vii) of the Disclosure Schedule, there are no underground storage tanks used currently or in the past for the management of Hazardous Substances and no polychlorinated biphenyls, asbestos, toxic mold, waste disposal areas, or wetlands at any property currently owned, operated, leased, developed or managed by any Acquired Company.

          (b) Prior to the date hereof, the Acquired Companies have made available to Sunrise or the Sunrise Representatives complete copies of all environmental assessments, reports and audits (and other documents that Sunrise or the Sunrise Representatives have requested for review) in its possession or under its control and that relate to compliance with or Liability under Environmental Laws by any Acquired Company, or the environmental condition of any real property that any Acquired Company has owned, operated, leased, developed or managed.

      4.19. Agreements with Affiliates.

          (a)  Section 4.19(a) of the Disclosure Schedule sets forth a true and correct list of (i) each Contract between any KRG Stockholder or any of its respective Affiliates, on the one hand, and any Acquired Company, on the other hand, (ii) each Contract between any portfolio company of any such KRG Stockholder or any of such KRG Stockholder’s affiliated investment funds, on the one hand, and any Acquired Company, on the other hand, (iii) each Contract between any officer, director, partner, employee, or other Affiliate of any Acquired Company, on the one hand, and any Acquired Company, on the other hand and (iv) any amendments, waivers or relinquishments of any rights relating to any such Contract referred to in clause (i), (ii) or (iii) immediately above that will remain outstanding after the Closing. All such Contract amendments, waivers or relinquishments were entered into by an Acquired Company, as applicable, on arm’s length terms and in the Ordinary Course of Business.

          (b)  Section 4.19(b) of the Disclosure Schedule sets forth a true and correct list of (i) each Contract between the ACS Stockholder or any of its Affiliates, on the one hand, and any Acquired Company, on the other hand, (ii) each Contract between any portfolio company of the ACS Stockholder or any of the ACS Stockholder’s affiliated investment funds, on the one hand, and any Acquired Company, on the other hand, (iii) to the Knowledge of the ACS Stockholder, each Contract between any officer, director, partner, employee, or other Affiliate of any Acquired Company, on the one hand, and any Acquired Company, on the other hand and (iv) any amendments, waivers or relinquishments of any rights relating to any such Contract referred to in clause (i), (ii) or (iii) immediately above that will remain outstanding after the Closing. All such Contract amendments, waivers or relinquishments were entered into by an Acquired Company, as applicable, on arm’s length terms and in the Ordinary Course of Business.

      4.20. Insurance.

           Section 4.20 of the Disclosure Schedule sets forth a list of all insurance policies maintained in connection with the Business and assets of the Acquired Companies. The insurance policies to which this Section 4.20 refers are in full force and effect, and all premiums due thereon (subject to any grace period specified in the policy) have been paid as of the date of this Agreement, and all premiums due thereon (subject to any grace period specified in the

policy) through the Closing Date will have been paid. Each insurance policy listed on Section 4.20 of the Disclosure Schedule that was renewed on or after May 31, 2006 was renewed on substantially the same terms as the corresponding expiring policy. The Acquired Companies have maintained insurance for the business and operations of the Acquired Companies in amounts and on such terms as are reasonable and customary for businesses of the type conducted by the Acquired Companies and covering risks which are normally insured by companies carrying on businesses of the type conducted by the Acquired Companies. Section 4.20 of the Disclosure Schedule also contains a list of all pending claims as of the date of this Agreement which are covered by the insurance policies maintained by the Acquired Companies and any instances within the previous four (4) years of a denial of coverage of any Acquired Company by any insurer, and, to the Knowledge of the Acquired Companies, the estimated amounts of such claims as listed on Section 4.20 of the Disclosure Schedule have been reasonably determined. No insurer under any such policy has cancelled or generally disclaimed Liability under any such policy or indicated any intent to do so or to materially increase the premiums payable under or not renew any such policy. No Acquired Company is in breach or default, and no Acquired Company has taken any action or failed to take any action which, with notice or the lapse of time or both, would constitute a breach or default, or permit termination or modification, of any of such insurance policies.

      4.21. Real Property.

          (a)  Section 4.21(a) of the Disclosure Schedule sets forth a list of each lease, sublease or similar Contract and all amendments thereto (the “ Leases ”) under which any Acquired Company is lessee or sublessee of, or holds or operates, any real property owned by any third Person (the “ Leased Real Property ”). To the Knowledge of the Acquired Companies, neither the whole nor any part of any of the Leased Real Property is subject to any pending suit for condemnation or other taking by any Governmental Entity and no such condemnation or other taking is, to the Knowledge of the Acquired Companies, threatened.

          (b) Complete and correct copies of all Leases have been made available to Sunrise by the Acquired Companies. All Leases are valid, binding and in full force and effect with respect to the Acquired Companies, and to the Knowledge of the Acquired Companies, are valid, binding and in full force and effect with respect to the landlord under such Lease and are enforceable by the Acquired Companies in accordance with their terms and, except for amendments identified in Section 4.21(a) of the Disclosure Schedule, have not been modified, amended, nor any provision thereof waived and constitute the entire agreement between the lessor and lessee with respect to the premises so demised. No Acquired Company nor, to the Knowledge of the Acquired Companies, any other party thereto, is or is alleged to be in material violation of or in material default in respect of, nor has there occurred any event or condition which (with or without notice or lapse of time or both) would constitute a material violation of or material default under, any Lease by an Acquired Company. None of the counterparties to any Lease has given notice of termination of, or is seeking to amend, any Lease. All premises leased under the Leases are in good working condition and repair, ordinary wear and tear excepted, and are suitable for the conduct of the Business.

          (c) The Acquired Companies do not own any real property or hold any options to acquire real property.

      4.22. Title to Property.

          Except as set forth in Section 4.22 of the Disclosure Schedule, the Acquired Companies have good, valid and marketable title to each item of owned personal property and a valid leasehold interest in each item of Leased Real Property and leased personal property, in each case, free and clear of all Liens other than Permitted Liens.

      4.23. Condition of Assets.

           Section 4.23 of the Disclosure Schedule sets forth a complete and accurate list of all assets and properties owned or leased by the Acquired Companies which would be required to be included in “property and equipment” or any similar category of a balance sheet prepared in accordance with GAAP. All of the assets and properties owned or leased by the Acquired Companies that are material to the conduct of their Business are in good working condition and repair, ordinary wear and tear excepted, and are usable in the regular and ordinary course of the Business. No Person (other than Persons who lease personal property to the Acquired Companies) other than the Acquired Companies owns any equipment or other tangible assets or properties that are situated on the premises of the Acquired Companies or that are necessary or material to the operation of the Business. The Acquired Companies own all assets and property necessary to the conduct of the Business by Sunrise in the manner currently conducted by the Acquired Companies.

      4.24. Customers and Suppliers.

          (a) Except as set forth in Section 4.24(a) of the Disclosure Schedule, (i) no Acquired Company has received notice from any customer, or group of customers that are under common ownership or control, that such customer (or such group of customers) has stopped or intends to stop purchasing, or has reduced or will reduce purchases of, or has sought or is seeking to reduce the price it will pay for, any Acquired Company’s products or services, and (ii) no Acquired Company has received notice from any supplier, or group of suppliers that are under common ownership or control, that such supplier (or such group of suppliers) has stopped or intends to stop providing goods or services to any Acquired Company, or has reduced or will reduce the supply of, or has sought or is seeking to increase the price it charges for, goods or services supplied to any Acquired Company, which in the case of clause (i) would have a Material Adverse Effect.

          (b) No Acquired Company is currently involved in any dispute with, or has received any notice of an intention to dispute from, or has received any request for audit, accounting or review from, any Person (including a group of Persons that are under common ownership or control) with whom any Acquired Company does business, relating to any transactions or commitments made, or any Contracts entered into, by any Acquired Company, on the one hand, and such Person, on the other hand.

      4.25. Books and Records.

          The respective minute books of each Acquired Company have been made available to Sunrise in their entirety. The Books and Records are true and complete in all material respects and have been maintained in accordance with sound business practices, and

reflect, in reasonable detail, all material transactions involving the Acquired Companies and the Business. Each Acquired Company has made and kept books, records and accounts which, in reasonable detail, accurately reflect, in all material respects, its material transactions and the disposition of assets to permit preparation of financial statements in conformity with GAAP. The stock ledger (or equivalent limited liability company records) and option ledger of each Acquired Company is complete and correct. The minute books (or equivalent limited liability company records) of each Acquired Company contain accurate and complete records in all material respects of all meetings held of, and material corporate (limited liability company) action taken by the stockholders (members) and the boards of directors (or managers) of the respective companies.

      4.26. Finders’ Fees.

          (a) There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the KRG Stockholders or their Affiliates or any Acquired Company who is or might be entitled to any fee or commission from any Acquired Company upon consummation of the Contemplated Transactions.

          (b) There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the ACS Stockholder or its Affiliates who is or might be entitled to any fee or commission from any Acquired Company upon consummation of the Contemplated Transactions.

      4.27. Relations with Governments.

          No Acquired Company, nor any director, officer, agent or employee o